Antin Infrastructure Partners S.A. (ANTIN) Earnings Call Transcript & Summary

Hello, and welcome to the Antin Infrastructure Partner Half Year Results 2023 Call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions] I will now hand you over to your host, Alain Rauscher, Chairman and CEO; and Patrice Schuetz, Partner and Group CFO, to begin today's conference. Thank you.

Thank you, Laura, and good morning. Welcome to Antin's Half-Year Results Conference Call. Earlier this morning, we issued our press release and slide presentation, which are available on our website. Our half-year report will be made available later today. For today's presentation, Alain will start by sharing the highlights of the first half and also share an update on our business activity. And I will then move on to talk about our financial results and our outlook. As always, we will conclude the call with an opportunity for you to ask questions. With that, I will now turn it over to Alain.

Thank you, Patrice. Good morning, everybody. It is a pleasure to welcome everybody here to this call to talk about our solid level of activity and strong financial performance in the first half of 2023. In the first 6 months of the year, we have continued to execute on our growth plan on fundraising, investments, and performance. We continue to make good progress on fundraising. Flagship, Fund V, and NextGen Fund I are getting closer to the target size. We announced 3 investments in the first half, all with a strong focus on sustainability. Our fund performance was overall stable, demonstrating the resilience of our portfolio companies, which continued to deliver healthy revenue and EBITDA growth. We are delighted to report a strong performance with significant top-line and profit growth. You will see that our half-year net income almost doubled, supported by strong operating leverage. As a last point, you will note that we have a strong balance sheet with substantial cash holdings, which provides us with inflexibility and will support our future growth initiatives. The first half of 2023 was marked by solid activity levels, which we can basically measure in 2 main areas: fundraising and investments. Fundraising commitments for Fund Flagship Fund V and NextGen Fund I amounted to EUR 1.2 billion in the first half. While this is an increase versus the first half of 2022, we did note a slowdown in the pace of fundraising, which is in part due to Flagship Fund V fundraising cycle as we are nearing the end and in part due to more challenging market conditions. You are all familiar with the denominator effect and allocation constraints that some fund investors face. And while infrastructure is less affected than other product market asset classes, it is not immune to these effects. Flagship Fund V reached EUR 8.5 billion in commitments at the end of the first half of 2023. So it's EUR 1.1 billion more compared to year-end 2023. And it corresponds, more importantly, to 85% of the fund's target size, which means that 85% of our fundraising is secured. Full raising for NextGen Fund 1 continued and has reached now EUR 1.1 billion in commitments in the first half of 2023. We raised about EUR 100 million compared to year-end 2023, and we are now very close to the target size of EUR 1.2 billion. We are EUR 100 million away from that amount. As a result of the strong fundraising, we have more than EUR 8 billion of dry powder to invest at an interesting point in the market cycle and with a strong pipeline of investment opportunities. The first half of 2023 was testimony to that as we made 3 exciting investments, all with a strong profitability and decarbonization angle. Flagship Fund V announced in June the launch of a voluntary cash tender offer, 400% of Opdenergy, a renewable energy platform headquartered in Spain. NextGen Fund 1 announced 2 investments in the first half of 2023. The first investment with the acquisition of PearlX, an operator and owner of fully integrated smart grid infrastructure systems in the U.S. The second investment was the joint venture with Enviro backed by Michelin to create the world's largest -- the world's first large-scale tire recycling group, and we are extremely excited by this project. Total investments amounted to EUR 1.1 billion in the first half of 2023, almost double the amount of capital deployed in the first half of 2022. Consistent with our exit plan for the existing investment portfolio, no exit was announced in the first half of 2023. The exit of Linda network, which was announced in the second quarter of 2022, closed in the first quarter of 2023. And we continue to patiently explore exit opportunities. But I will come back on the importance of, I would say, passion in the next slide. It is, of course, very easy to invest capital. We said once you raised money, you have an open checkbook, and if you want to make an investment, just overpay. And it's certainly not what we want to do. So we are trying to be, and I think we pride ourselves for being extremely patient and disciplined. All of our investments need to meet the anti-infrastructure test or what we call in our dragon the intra-test, which means we look for businesses that provide essential services to the community, have high barriers to entry, recurring cash flows, inflation linkage, and downside protection. Those businesses tend to perform well in all market environments and demonstrate significant resilience. And when we look at the right part of this slide, I think this is really a testimony of basically the good investments and good, I would say, the prudent approach that we take. We are very selective. As you can see, we have held about 50 -- a bit more than 50 investment committees in the first half of 2023, resulting in 3 investments. And the 3 investments were proper investments, so there was not an auction with some attractive value creation plans a strong focus on sustainability. So in this number of 50 investments taken to its investment committee does not take into account the many investments we have reviewed and dismissed prior to discussing them at the investment committee. So all that results into -- if we do a good job, and I think we'll do a good job into a portfolio, which demonstrates exceptional resilience in adverse times than the one we know today. Our postal companies continued to deliver strong performance over the last 12 months despite a [indiscernible]. And this is summarized by the 2 figures. Our portfolio companies have increased combined revenues by 18% and have increased their EBITDA on a combined basis by 21%. I'm talking about the portfolio companies, not one portfolio company. So this demonstrates the solidity, I would say, and the robustness of the investment we do and of the portfolio committees. Another -- and this basically is achieved by focusing on developing new CapEx to develop -- to funding organic growth to also make acquisitions and take whatever performance initiative we can do. The second important point on the right side is that it is common knowledge that in the market, and I think it is largely exaggerated in my view and certainly forced in the case of Antin, that access to debt is difficult if not mission impossible. Well, we managed to secure more than EUR 12 billion of debt since 2022. And this has been used to fund the acquisitions, to fund CapEx, to fund add-ons, but also to fund equity bridge facilities. So more than EUR 12 billion of debt has been raised since 2022. So for those who think in the market, okay, no one raises money. No one makes investments. No one gets access to that. I think these numbers, which we share with you, illustrate that this is certainly wrong in the case of debt. Another important point is that 100% of debt is expiring in 2025 and beyond. And actually, we don't communicate on the exact, I would say, scale, but I can assure you that the debt expiring in 2025 is only a small fraction of the total debt, which is basically extended on a large, I would say, a number of years. So again, no debt issues on our side. This means that your debt is for free. It is not for free. It is more costly, but it is available for quality investors. If we look at the performance of our funds, vintage by vintage, quarter after quarter, we will see that the performance that we post is de facto excellent. Fund II, which is a vintage of 2013, basically has been disposed of as realized about 92%. There's only one investment to go. And as you can see, to date, the money multiple is 2.6x, and we are confident that basically when we sell the last asset, we will be in line with members. So very, very solid performance. In the case of Fund III, we have realized only 38% of the portfolio, which means the value you see here does not correspond to a final value of performance. But what we can tell you is that to compare the same number of the maturity of the fund, Fund III is in line or even above Fund II, which, as you can see, now is nearly complete and post very, very superior returns overall. Fund 3B, only 26% of the portfolio has been realized to date. And again, we are very close to Fund III, and we are very hopeful that basically, the performance will be in line with Fund II and Fund III. And in the case of Fund IV, well, no realization whatsoever, the fund, it's a vintage of 2019. It is completely in line with, I would say, our value creation plan compared to other trends vintages. You see a slight decrease from 1.4 to 1.3 money multiples in the last quarter, and this is essentially due to the fact that we have completed our last investment, which was Wilton. And this investment, basically, of course, is down at cost, is booked at cost, which is 1.0, and mechanically reduces, I would say, the money multiple. But it's totally normal because it's early days if you want. It's a sort of a J-curve effect, and it is not a reflection of reduced, I would say, performance expectations quite to the contrary. So all our funds are performing on plan or ahead of plan and at times significantly ahead of plan. And so we are, I would say, very happy for this extremely healthy performance, which is really -- which underpins the robustness of our company as a listed entity. With this, I will now hand over to Patrice who will review our financial performance of the first half of 2023.

Thank you, Alain. I will now talk about our financial performance, and I'm pleased to report that Antin achieved strong growth across all key performance metrics. AUM grew by 37% and stood at more than EUR 30 billion. Fee-paying AUM grew by 45% and reached close to EUR 20 billion. As a result, our revenue grew by 44%, driven entirely by management fee growth, and management fees that are long-term contracted and recurring in nature continue to account for more than 98% of our revenue today. Underlying EBITDA grew 73% faster than revenue, which is a reflection of the operating leverage embedded in our business model. EBITDA margins expanded from 50% to 60%, representing an improvement of 10 percentage points. And underlying net income nearly doubled and reached more than $60 million in the first half of 2023. These are significant growth rates and that's a result of our scale-up and expansion strategy, and they also reflect, in particular, the significant progress we have made on fundraising for Flagship Fund V. Let's now take a closer look at the revenue buildup. The 44% increase in revenue was driven mainly by the flagship fund and entirely by management fees. $40 million were added for the flagship strategy as a result of different effects across funds. $64 million relates to an increase for Fund V, which was offset by a decrease of $21 million from Fund IV, which moved from the investment to the post-investment period in the second half of last year and, therefore, charges management fees at a lower rate and based on the invested capital at cost rather than the committed capital. In addition, there were slight declines in management fees from Fund II, III, and 3B due to realization of investments. Management fees from Mid-Cap Fund I was stable, and management fees for NextGen Fund 1 increased by $4.5 million as we continue to raise capital for that fund. Now in addition, carried interest and investment income recorded a loss of $0.9 million in the first half of 2023 compared to a gain of $3 million in the prior first half. So that's a decline of $3.9 million year-on-year. This half-year loss is mainly driven by the J-curve effect for Fund V, which means the fund recognizes costs for the due diligence of investments and fees, while the portfolio companies that we have acquired are not yet being revalued. So that's a totally normal investment income pattern in the early stages of a fund's life. Now I want to take a moment to talk about our carried interest. Our P&L today doesn't reflect carried interest as almost all revenue are recurring management fee revenues. There is, however, a very significant upside associated with that carry. And as you know, we've put in place a policy at the time of the IPO to allocate 20% of all carried interest for future funds to Antin, whereas carried funds raised prior to the IPO were allocated to our investment teams and employees. While there is a time lag between the allocation of carry and the moment it shows up in the P&L, we do expect that Cary will add significant revenues and profits over time. And these revenues and profits will be in addition to our already rapidly growing management fee stream. So we expect them to further enhance the growth profile of the group. Based on the capital we raised as part of the current fundraising cycle, so essentially a 3-year cycle, typically, the carried interest revenue opportunity is $435 million. So it's where you see at the bottom of the page. If we achieve Fund V's target size of EUR 10 billion, that carried interest would grow to $500 million. And if we hit the $12 billion hard cap, it would expand further to $570 million. Now again, that's our revenue opportunity attached to the capital that we raised over a 3-year period. And of course, we expect it to expand as we continue to raise funds in future fund cycles. Also, I would note that these estimates assume that we achieve a gross multiple of 2x, whereby historically, the realized performance of the Antin funds was closer to 2.6 to 2.7. So obviously, we need to deliver performance for carried interest to be realized. We need to beat our 8% hurdle, but as Alain has explained on our performance page before, we have an exceptionally strong track record to deliver that. Moving to our cost base. As you see, we continue to grow our cost base in a very controlled manner as we scale and grow the business. Total operating expenses amounted to $55.3 million in the first half of '23. That's an increase of 15%, which is substantially lower than the 44% revenue growth and demonstrates the operating leverage embedded in our business. Personnel expenses accounted for close to $40 million, an increase of 23.6%, which was driven by higher headcount, inflation-linked wage increases, and promotions across the firm. The number of employees increased primarily in the investment team and in operations. The investment team where we added 8 individuals in Paris, London, and New York, and the growth in operations, where we added 12 individuals, which was linked to the build-out of critical support functions and technology, which will further support the scalability of our operating platform. The team in New York grew from 40 to 48 employees year-on-year. And with respect to our hiring plans for the year, we're fully on track, we've communicated earlier in the year that we expect to add 20 to 30 employees. We've added 12. So that guidance is very much confirmed. With respect to other operating expenses and taxes, we recognized a decrease of 2.5%. However, if we exclude placement fees, which are periodic in nature, these costs would have increased by 8.4%. Moving to our earnings. The strong growth we recorded in revenue and prudent cost management led to a significant step change in the earnings capacity of Antin. Our underlying EBITDA grew 73% and reached $82.8 million in the first half of '23. Our underlying net income almost doubled and reached $60.7 million, so did our earnings per share. And this increase is driven by higher EBITDA from fundraising and obviously, some positive net financial income, which we generate on our substantial cash balance. I'll talk a moment about our balance sheet. As you know, we operate a balance sheet-light business model, which means we require limited capital to support the scale-up and growth of our investment strategies. Typically, we co-invest 1% alongside our fund investors, although it could be slightly higher in certain situations. And in addition to that, we invest 0.2% of a fund size to fund the carried interest commitment. So put it simply, 1.2% of a fund size is what we would put down between co-invest and carry off our balance sheet. Now that differentiates us substantially from managers that operate a capital-heavy model and need significant capital to support their growth. We do hold $425 million in cash on our balance sheet, which we can use to support the growth of our business. A portion of this cash will be used to fund future investments in co-investment carry, but a more significant portion of it will remain available. And that those funds we want to use to support our growth ambitions. Could be either used for the seeding of new investment strategies or it could be used to fund acquisitions. It's a powerful balance sheet, and we intend to use it to further expand our revenue and earnings capacity in the future. On the next slide, our dividend policy is to distribute most of our cash earnings to shareholders. And given our substantial cash holdings, we don't have a need to retain cash at this point. Consistent with this policy, we're announcing an interim dividend of $0.32 per share, which is equivalent to a payout ratio of 94% based on the underlying net income. You will note that the interim dividend more than doubled compared to the first half of 2022, and we expect payout ratios to continue to be high. The ex-dividend date has been set on the 14th of November, and the payment date is the 16th of November. Now with respect to the outlook for 2023. We are further specifying the guidance that we had shared with you earlier in the year. In relation to fundraising, based on how the year has evolved so far, we expect to raise around EUR 10 billion for Flagship Fund V in '23. Now that's the lower end of the guidance range we had communicated earlier in the year, and it reflects the conditions we see in the market. Having said that, we continue to remain confident in our ability to reach the hard cap of $12 billion in 2024. So the punchline is it's just taking a little longer. With respect to the EBITDA, our guidance is linked to the fundraising. And we, therefore, expect to reach approximately EUR 200 million in EBITDA by year-end, which is largely in line with equity research consensus. As you know, all investors that enter Fund V are paying management fees from August 2022 onwards. So that's the concept of catch-up fees or late fees, as some call it. And as a result, any commitments we raised in 2024 rather than 2023, will just shift revenues and profits from 2023 to 2024. So there's no foregone revenue or foregone profit if the commitment is raised later. It simply moved from one period to the other. Now with respect to cash distributions, we will continue to distribute a majority of our cash earnings, and we expect that annual dividends will grow over time. With that, I will hand over to Alain to share some closing remarks.

Thank you, Patrice. So basically as any conclusion and before taking, of course, your question, I think the one extremely favorable aspect about Antin. First of all, we are in the early part, early stage of the super cycle, and really weigh my words, lipase super cycle, which requires an enormous amount of capital to be deployed. You are aware of the U.S. initiative called the IRA, which surprisingly is called Inflation Reduction Act, but it's mostly about basically funding the transition to, I would say sustainable energy. And the magnitude of the investment, which are being contemplated is absolutely huge in the states. And as you know, Europe is catching up also to take similar initiatives. I think having a position in both Europe and the North American market, where we can deploy up to 40% of our capital raise. I think this is an enormous boost to the potential that we may be from. And the key 2 main trends are energization and digitalization, which are long-term megatrends extremely capital intensive. As a result, infrastructure is among the fastest-growing asset classes in product markets and institutional investors remain under-allocated relative to their target allocation levels. Of course, we have to overcome short-term effects, such as the denominator effect we've discussed in current market conditions, but the medium- and long-term prospects remain highly, highly attractive. We also are the first -- the largest actually pure-play infrastructure private equity firm in Europe and among the top 10 globally. So as a result, I think we are very well positioned to continue winning market share. We are also a top European performer in value-added infrastructure investing. And our performance is basically our post-driven approach, I think, is a very, very strong growth engine. An important point also, we are management fee-centric or if you want, more than 90% of our revenues comes from management fee, which, if you think of it, is a very, very strong base of income because I remind you that we basically have 10 years of guaranteed revenues, whether we launch a new fund or a new strategy. So it gives you an idea of the robustness of this trend. And as such, we are not at all, I would say, exposed to the volatility of other streams of income until, of course, we will get some significant carry-in potential. And as Patrice has mentioned, we estimate this potential as close to EUR 500 million as we speak. Our business model is fundamentally capital-light and highly cash-flow generative, which allows us to distribute most of our cash earnings to shareholders. And finally, we have more than EUR 400 million in cash to support the scaleup of our funds as well as future growth initiatives. It is, of course, evident that in the current market conditions, we are working a lot on such new growth initiatives. But certainly, we take -- we've learned to be very patient, and this is really part of our DNA. And certainly, it's not time to work to study and to explore new, I would say, growth opportunities. But certainly, we need to first follow our priorities, which is to raise, I would say, finish the fundraising of Flagship Fund V NextGen, deploy capital, and then we will basically be positioned to announce something more substantial in due course. This concludes our presentation, and we are open for questions from the audience.

[Operator Instructions]. We will now take our first question from Nicholas Herman of Citi.

I have 2 questions, please. One on deal activity one on financing and one on growth. On deal activity, good to see the recent announcement of the energy deal. Could you just talk a little bit about the deal pipeline as it stands, please, across the 3 strategies? And I guess, also just which of mid-cap and NextGen would you expect to reach, say, 75% threshold of committed capital first? That's the first one, please. On the second financing, I think you've talked in the past about how you are -- and again, how you're less constrained versus other private market peers on financing, given the appetite for lenders to finance infrastructure and real assets, I guess also mid-cap assets would also be typically less level 2. In that context, can you just talk about the kind of leverage in gearing you were able to obtain for energy acquisition, please? And then finally, on growth. It's been almost 6 months, I guess, since you formally announced, you'd be looking to launch a new strategy, and that's part of the reason for moving to the absolute EBITDA target. I understand that it is more of a 24/25 event. But just curious, has that become a little bit more concrete to be realized? Have you progressed at all in terms of implementing or identifying people for hiring or otherwise? Just curious about how that's kind of evolving.

Can you remind me of the first question? It was about the pipeline, right? I can split between the front. Yes, again, Okay. Yes, sorry. Yes. Okay. Maybe I can take this question, Patrice. Okay, pipeline, frankly, between 3 strategies is broadly, I wouldn't say it's even part, but it's quite comparable. In fact, the way we function is, I would say, is pretty -- I would say, is extremely well organized, to be quite frank. So we have the same investment committees. And so we will do progress. We are part of the meeting where we will also review progress on coverage. And to be fair, as the -- all the projects, whatever the strategy go through the same in committees, we have some, I would say, some -- we can monitor basically if a sector is effective than another. If a strategy is effective or not than another. And to be frank, we don't see any difference. When it comes to what makes between mid-cap and the flagship strategy is just a 5. So typically, the same type of projects, but smaller projects. So it's very, very simple. So the pipeline is very robust. On the debt side, debt, as I mentioned, is available for infrastructure, I would say, investors and for those in particular who pursue value-add strategies. And again, you have to -- the reason for that is quite simple. The first reason is that we have underlying protections within the contracts we have. So for instance, if we serve some, say, fiber, we basically contract with some operators to provide them with some fiber. We got some lease contracts, which are indexed on inflation. So for a banker's perspective, it's as good as it can be. It's as good as it can be. If you sell yogurt to Walmart or to Sainsbury, I mean you come to the end of the year and say, look, I have 5% inflation. Can I increase my price by 5%? The client will say, "You know what, I was thinking of you guys to reduce by 10% because I'm under pressure myself." So we have this huge protection, which is extremely appealing to banks. And there is the second reason why as value-added investors, we are extremely bankable, so to speak, in adverse times, is because by being value-added investors, we provide an extra buffer to bankers. So not only do we have very strong underlying, I would say, assets. But on top of that, we have a buffer, which is that if we basically are facing the solution, we just have to work more, work harder, and people know that. So we tested the infrastructure, I would say, market is very slow conditions starting initially during the subprime crisis, and that market was always open for business for infrastructure, I would say, investors like ourselves when the -- I would say, the mass-market was closed for most, I would say, by a ton for a while. So that's an extremely important feature about that. I cannot comment on the leverage that we put to find OBD Energy because, clearly, it is not public. I can just tell you that we are putting in place a leverage, which is in line with the kind of leverage that we have put in place so far in our investments. But I cannot comment on data because they are not public. Third point concerning new strategy. We are extremely committed to develop new strategies beyond what we do today. If you remember, we moved about from 3 years ago to 1 strategy, which was a flagship, which has borne over time to 3 today, flagship mid-cap, and NextGen. And it is certainly not over yet. So we already made a journey to expand basically the offering, so to speak, and it's not over yet. I think there are 2 main considerations to have in mind in this respect. The first one is that, first, we want to be sure that we have a very solid base of people to deliver the 3 strategies we embarked on before envisaging to develop a new strategy. And so we work a lot on improving our processes, training. We are sort of a university, so to speak where we have to train people to be sure that everybody, whichever strategy they work on, achieves the highest standards of excellence we expect from people working at Antin. And this is a top priority. And as you can appreciate, I'm sure, when you are working in a fast-growing firm which recruits a lot of people, this is a big, big challenge. And of course, it's a main focus of attention for ourselves. And I think it's going extremely well. We have taken initiatives to further improve, I would say, our investment committees, and also, I would say, the monitoring of project new projects and the monitoring of progress to portfolio companies. And this goes into that direction. So that's the first thing. We will not do anything new until we are 100% sure we have the right people, completely trained and prepared to basically embark on another pillar of growth. The second important thing is, of course, timing. We are working a lot on new strategies, and this can be either making some acquisitions. It can be launching organic initiatives. It is evident that launching organic initiatives is less costly and allows also for, I would say, higher control of the people whom we hire as we have successfully done to be fair operations and deal with the mid-cap strategy and with the NextGen strategy. So we are not excluding anything. We're working a lot on those things. But I'm sure you will appreciate that now is not the right moment to go to market, given the current market conditions for these new initiatives. So first, we take time to consolidate our setup, and we are very proud to have a very high-quality team. And we are working -- we are prepared to launch new initiatives. But of course, we will have to do that in due course when market conditions are good. But don't worry, we are working flat at on that.

Yes. And just a couple of quick follow-ups, please. I think on the deployment outlook. I guess some peers have indicated that they expect deployment to increase in the second half. I mean, I guess presumably it would be the same for you, given you have, as you call it, a robust pipeline. And then the second one on financing. I guess what I'm trying to get at here is that will Fund V committed capital will increase by 6 to 7 percentage points. So that would be about EUR 600 million to EUR 700 million. And as I'm mistaken, I think OBD Energy's enterprise value was just shy of EUR 900 million. So it doesn't suggest particularly significant leverage. So just any kind of comments you can make around that would be helpful.

Well, I mean, frankly, again, I cannot really make a commitment statement on OBD Energy. Maybe you have some metrics even share or Patrice, but I'm not sure we can share a lot. It's going to be open.

Look, it's also a live situation that's evolving. So it's just too early to comment on a particular investment. And as you know, the tender offer is still ongoing and live. So I think we will -- at some point, we can share more on particular situations possibly, but it's a bit premature. I mean, in general, on the deployment side, I would say that on flagship Fund V, we made 2 investments very much on track, sort of typically, if you think about an ordinary fund that would make, call it, 9 investments over a 3-year period, we would want to do, sort of, call it, 3 investments a year. It's always lumpy, so you could have periods when you have several announcements in a short period of time and then periods when it's taking a bit longer, but that feels pretty much on track. And mid-cap, there are probably going to be 3 more investments. We're sort of 1 year away from hitting a 1-year period for that fund. So that's very much on track as well. And NextGen, close to 50% deployed, is probably slightly ahead of plan on the deployment side, but it also had a number of announcements in a fairly short order. So all of these are on track. I think for your model, I would still assume that mid-cap will be coming back to market before NextGen. At some point, the latter part of next year and NextGen is probably more likely a 25 initiative. And we're going to need to see how the deployment will continue and how the value creation of the underlying portfolio companies will track. But at the moment, it would sort of fall somewhere around 2025. Very helpful.

And we will now move on to our next question from Arnaud Giblat at BNP Paribas.

I got 2 questions, please. If I can just start with the investment pipeline. So should we -- how do you think about vintage diversification? We've always done -- you've always been working towards a 3-year fund cycle. Is that something you're still comfortable to work towards? Or is that really an important consideration buses diversification? And a subset of that is, I suppose, how have purchased price book multiples adjusted over the past 12 months? Have they come down? My second question is on the mid-cap fund. So you just mentioned probably a 2024 launch. Are you still considering splitting that fund into sleeve European and the U.S? My third question is on the dividend. So the payout ratio this half is 4%. I heard your commentary that you will help the substantial or the majority amount of earnings. Is the majority somewhere in the '19 as the majority going forward?

Look, I can start on that. I mean on the investment pipeline and fund diversification, in particular, our current base case is still that we run on a 3-year fund cycle. I think it will be way premature to assume anything different than that because Fund has just been less than a year in its investment period, and it's sort of tracking pretty similarly to where prior funds have been at similar periods. But when it comes to diversification, we obviously try in every fund to have a balanced approach between the sector exposure that we take, the geographic exposure that we take, the type of risk that we take to achieve some degree of diversification in those funds. And we've done that consistently in prior vintages and we're doing it at the moment as well. Now with respect to multiples adjusted over time. I'd say it's very difficult to measure the types of companies we acquire on a multiple basis. Very often, those are long-term contracts. And if I take a 10-year concession, it will obviously price differently than a 15- or a 20-year concession, as an example. So we tend to value companies on a fundamental approach. But what has happened certainly in this market environment is the cost of capital has gone up as interest rates increased. And as a result, valuations have adjusted. Now in many cases, what you're seeing in an inflationary environment is this, you're discounting higher future cash flows at a higher cost of capital. Some companies are beneficiaries of that and some are not. But if the inflation pass-through works, which in many cases in our existing portfolio, it works extremely well, you're sort of offsetting these 2 effects against each other. On the mid-cap and splitting it into a European versus the U.S. mid-cap, it's just too early to tell. I think there are arguments that would be in favor of that. There are arguments that are against that. We will evaluate it over the coming months. And my expectation is that at some part, early part of '24, we will probably be able to give more specific guidance around that. I think what we can say today is it's not our expectation that a split would materially change the outcome of sizing for Mid Cap. It's more about what we think is going to be better for fund investors and achieving the right portfolio mix, and we're going to be thinking about that over the coming months. With respect to the dividends, we've always had a dividend payout ratio that was north of 90%. Our expectation is that as long as we have cash balances as material as the ones we have, there's no need to retain cash. So directionally, it will be above 90% payout ratio at the end of the year, and there's no reason that would change imminently unless we find a way to deploy those $425 million into something that would produce incremental revenues will produce incremental earnings and then we may need to retain at some point, cash to support the growth. But at the moment, we wouldn't see a reason to retain cash.

We'll take our next question from Tom Mills at Jefferies.

I've got a couple of questions, please. I think one thing that perhaps quarters quite surprised, perhaps even you guys by surprise, is the extent to which infrastructure fundraising got caught up with the whole slowdown in PE fundraising for all the reasons that we discussed earlier in the call. I guess given lower allocations to infrastructure relative to buyout and most surveys saying that people still intend to increase their allocation significantly to infrastructure. Do you see any scope for allocation buckets to infrastructure to decouple from buyout over time? Or do you just see that in tough fundraising environments for buyout is going to continue to be the case for infrastructure? Because I guess on the private credit side, at least, obviously, we're seeing quite strong fundraising coming through there. So I'd just be interested in your sort of longer-term thoughts there. And then I hear your comments on dividends. What would we need to see for you to consider doing a buyback here? I recognize the liquidity situation in your shares is ideal, but the underperformance of your shares year-to-date versus sort of global peers feels quite extreme.

Yes. Maybe I can take the first question, and Patrice can answer the second one. I think fundraising for -- the prospects for fundraising for infrastructure remains absolutely excellent. There is no -- should be no question again that we are not seeing a beginning of a new cycle where people are going to raise smaller funds. In fact, think funds will be bigger and bigger going forward. We are just faced with time in the, I would say, in the financial cycles where pension tan, instrument investors at large basically say, okay, we have now a new situation with rising, I would say, rates for bonds. Mediocre returns, as you know well, for equity markets. In many cases, especially if you take off the farm and some, I would say, some guys who are driving the prices up. If you look at the bulk of the market, it's pretty drop out there and, frankly, everywhere. So people say, okay, where should we put our bets? And then, of course, there are issues on the real estate market which is heavily dependent upon, I would say, has been heavily dependent upon cheap debt. So plenty of issues around, I would say, for quality. And it's quite normal that given the, I would say, strategic uncertainties with the Ukraine conflict in particular, given very volatile, I would say, energy prices, but still remaining at high levels. Very constantly, I would say, energy transition looming. Basically, it is quite normal that institutional investors take time to review their options because this is what we talk about. It is interesting. We have about I think it's a base of about 300, I would say, LPs globally, and plus, of course, numerous discussions we have with others. And so we have a pretty good view as to how the market thinks about deploying capital. And clearly, people are not saying we shy away from infrastructure, but we have to say, what do we do? Shall we not start to invest part of our, I would say, assets into bonds because [ net loans ] are starting to pay off well, should it be carpet bond, should it be whatever. So it is normal that our market is requesting. And this slowdown in fundraising is really about that. But podiatry, by the dialogues we have with 2 very large investors from anywhere in the world, I would say, the support and the interest to invest -- continue to invest bigger amount actually in infrastructure is there. There's no doubt. But there is a sort of a critical time when people are just sitting back because, frankly, from a time when there was no money to be made in bonds, which has put enormous pressure on many pension funds in particular, we have to pay the science. And certainly, some guys can make 5%. So you have to adjust this new deal. So I think that this is a temporary effect. People are taking stock of the situation. And I'm very positive, I'm very optimistic that, long term, we are in a fast-growing place. And if anything, digitization and intention will require enormous amounts of money that governance cannot afford to mobilize. So that's my first thing. Concerning the buyback program, Patrice, your call?

Yes, of course. What, Tom, with respect to the buyback, we've obviously thought about it. And of course, from a valuation perspective, we do believe it will make a lot of sense if we were to buy back our stock because when we came together the fact that we -- the majority of our earnings are fee-related, we have a very substantial carry opportunity. We have very substantial cash on our balance sheet. We don't feel that's accurately reflected in the value of our stock. Having said that, we have a 15% free float. We want to preserve the liquidity for investors. And we also believe that we can use this cash to ultimately invest in growth opportunities that will produce attractive revenues and attractive earnings. So with all of these things, we've not moved forward with the buyback. That doesn't rule out we may do it in the future, but we've decided not to do that at the moment.

You are specialists actually of the, I would say, alternative markets. And you know very well, basically, where the trends are since our IPO. And as you remember, we probably went at the highest, the peak of the market. If we look at the evolution of our price compared to our peer group and particularly in Europe because, of course, the U.S. market is very different with many more strategies and particularly some criteria, which are a buffer in today's times because credit, of course, is at least temporarily very favored. So if you compare Antin to the EQT to Partners Group to the ICG to the rich point of the world, you will find that basically we are actually doing better than those people in terms of sharp price evolution. We're not pleased with that, to be quite frank, because, of course, we went to market at the highest point in the cycle. But clearly, we are in line with evolution and pretty -- in fact, pretty favored compared to them since our IPO. But the performance, I think, is, in my view, of the sector, in my view, suggests that people cannot raise funds, which is untrue. We raised money. And frankly, I secured 85% of the target of the EUR 10 million ton is something which, frankly, we are pretty proud of, and not anybody can do it, but we've done it. We can raise that -- we told you more than EUR 12 billion of debt raised, and we can do deals. So you see, I'm very optimistic. I think the perception of the sector at large and the risk factor associated to it, in my view, is excessive. I also think that if you look at the previous cycles, like 15 years ago, in particular, you will observe that there was no major failure because, in fact, if you are investing in a company and it is faced with some difficulties to be sold, well, what people do, what people like ourselves do or buy a plan, it's very simple. They keep it 1 more year or 2 more years, okay? And it is very rare to find some distressed sellers, very, very rare. You may have some problems, of course, in some customer companies because life is complicated. But distressed sellers are very, very rare. People just click to the investments and just wait until the better times come and a better time to come. So I'm not worried about that.

And we'll move on to our next question from Bruce Hamilton at Morgan Stanley.